If you look at a chart of Bitcoin during 2017, it really only went higher during the first 11 months.
By Matt Thalman
The in the middle of November it was as if the cryptocurrency was strapped to a rocket ship as the price shot higher until mid-December.
While early investors made a killing on Bitcoin in 2017, the real excitement all happened in December. Bitcoin started 2017 at $996, began the month of December at $10,500, then peaked on December 17, 2017, at $19,206, but ended the year at just over $14,000. When Bitcoin hit its peak, it was up nearly 100% for just the month of December, but even after falling $5,000 in only 14 days, it still ended the month up more than 30%.
While Bitcoin may have only risen 30% in December, it increased more than 1,350% in 2017, with nearly 400% of that gain coming in December and 800% of its coming after November 1st. So what happened in the last two months of the year that caused the price of Bitcoin to rocket higher, in such as short period?
In one word, Exposure!
In early November the general public, those outside the world of finance, began hearing about Bitcoin and cryptocurrencies for the first time. They were being told Bitcoin and cryptocurrencies where the wave of the future. Blockchain technology(NYSEARCA:XLK) was going to change how business transactions were being processed. They were being told that investors were making money hand over fist and this was the time to get in. There would only be 21 million Bitcoin’s ever mined, thus not allowing others to manipulate the price and that no one person, government, or central bank controlled this new digital currency.
They were told, buy a cryptocurrency now, and you will make a killing, Bitcoin only keeps going higher, it’s easy money.
None of the information the average person was being told was a lie. It was all true.
This increased exposure hit a tipping point when Thanksgiving rolled around. With the holiday falling on a Thursday, it is believed that the conversation at many dinner tables across the U.S. touched on cryptocurrencies and Bitcoin at some point, because over the course of the following three days coinbase, the largest and most well-known cryptocurrency exchange had over 100,000 new accounts open up.
The price of Bitcoin jumped more than $2,000 from November 24th to the end of the month.
The coming December 2017, which will be known as the month of Bitcoin Futures. The two largest U.S. future’s markets both saw their proposals to offer Bitcoin futures approved, and trading of said futures began during the month. The Commodity Futures Trading Commission approved the bitcoin futures and the CBOE, CME, and the Cantor Exchange all began trading Bitcoin Futures during the month.
The reason Bitcoin Futures where so important is because simply by gaining the ability to have a futures market, Bitcoin’s legitimacy increased in a blink of an eye. Furthermore, now that there where Bitcoin futures trading, the big Wall Street funds and investors could now get in on the cryptocurrency action.
The new money would start flowing into Bitcoin through the trading of its futures. This was huge in terms of making the asset more well known and respectable. But, unfortunately, it only hurt Bitcoins greatest attribute, its limited supply.
See Bitcoin Futures, unlike other futures contracts, are not settled with Bitcoins, they are settled for cash. This means when you buy Bitcoin’s through the use of a futures contract; you don’t end up owning Bitcoin’s, you just get the value of the agreed-upon Bitcoins in cash.
Therefore, when Bitcoins are traded with futures contracts, the actual supply and demand of actual Bitcoin’s is not affected. There was one other thing that happened in December which affected the supply and demand of Bitcoin, Bitcoin Cash.
Bitcoin Cash was created when Bitcoin’s blockchain was forked back at the beginning of August. Those who owned one Bitcoin, now owned one Bitcoin and one Bitcoin Cash when the fork occurred. But, Bitcoin Cash was difficult to trade until coinbase, began offering an exchange in December. Once it was easy to trade Bitcoin Cash, Bitcoin itself saw its price take a hit.
Furthermore, this event publicized the fact that Bitcoin had been forked in the past and that there were a lot of people planning to fork it again in the future. Each time Bitcoin is forked, and a new cryptocurrency begins, it increases the supply of cryptocurrencies available in the market. It hurts the original idea that there would only be 21 million Bitcoin’s ever mined. It hurts the idea that 1 Bitcoin is worth more than 1 Bitcoin Cash, or 1 Litecoin or 1 Ethereum or any of the other hundreds of cryptocurrencies now available.
Bitcoin futures are still new, how Bitcoin Cash or the other cryptocurrencies will affect Bitcoin, and how different world governments and agencies will handle cryptocurrencies is still very much unknown. But, after a wild end to 2017, the cryptocurrency industry isn’t yet showing signs of slowing in 2018. It should be fun to watch it unfold.
Happy New Year and Happy Investing in 2018,